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Exxon Mobil Corp. called for European leaders to repeal a new climate and human rights law that would fine corporations and is threatening to become a flashpoint in US-EU trade negotiations.
Designed to root out human rights abuses and improve environmental standards, critics say the European Union’s Corporate Sustainability Due Diligence Directive has evolved into a sweeping set of regulations that make net zero plans mandatory and apply outside Europe to companies’ entire global supply chains.
“It’s the worst piece of legislation I’ve seen since I’ve been in this job,” Exxon’s Chief Executive Officer Darren Woods said in an interview. “Given the perspective I have around the world, that says quite a bit.”
The directive has come under scrutiny from member states including Germany and France, which say it risks harming competitiveness. European lawmakers are considering several cuts and amendments to the legislation, Jörgen Warborn, the member of parliament charged with ushering the changes through the legislature, said in June.
Woods says the concessions do not go far enough.
“We’re concerned about the fact that they’re killing the manufacturing sector and frankly smothering economic growth driven primarily by the desire and effort to kill oil and gas as a way of addressing climate change,” he said.
Earlier: Exxon Halts €100 Million Recycling Investments Due to EU Rules
Violations could result in penalties 5% of a company’s global revenue “which frankly would be bone-crushing to any company,” Woods said. “We’re concerned that frankly, there are few people who understand the implications of this.”
The EU directive was passed last year but still faces several key votes in the coming months that will decide how it’s enacted. Full implementation is scheduled for 2029. Proponents say the law will promote labor rights around the world, increase transparency along supply chains and provide legal backing for corporate climate targets.
The directive could require all large businesses in Europe to develop legally-binding plans to comply with the Paris Agreement climate treaty and limit global warming to no more than 1.5C above pre-industrial levels.
“It opens up standing for any activist or NGO who wants to challenge those plans and take us to court,” Woods said, referring to non-governmental organizations.
Exxon has a goal to reach net zero by 2050 but maintains its primary role is meeting customer demand set by market forces, rather than participating in a mandate that could restrict the supply of fossil fuels. Several forecasters including the International Energy Agency have laid out scenarios saying the world is not on course for this pace of emissions reductions, with low-carbon energy sources still unable to fully replace fossil fuels.
“There are no viable, real solutions to achieve what that law is mandating,” Woods said.
American executives are also concerned about the directive’s wide-ranging jurisdiction that would include any company that generates more than 450 million euros ($532 million) of revenue in Europe. In a letter to the Trump administration in April, the US Chamber of Commerce called it an “extra-territorial” law that “would undermine US sovereignty and authority to regulate its own market.”
The Trump administration elevated the EU’s directive to one of the key negotiating points in its trade talks with the block, according to a framework agreement published in August. Senator Bill Hagerty, a Republican from Tennessee, introduced legislation in March to “shield” US companies from the laws, which he called “ideologically motivated regulatory overreach.”
Woods backs Hagerty’s bill and supports the Trump administration’s plans to repeal the law as part of its tariff policy. Exxon has sold or shut down several European refineries and chemical operations in recent years as it exits higher-cost operations and focuses on more productive assets elsewhere.
Europe is “trying to build this green economy that turns out frankly isn’t working,” he said. “Rather than fix what they’ve created, they’re trying to drag American companies that do business in Europe into their mess.”
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